Empirical Project 4 Solutions

These are not model answers. They are provided to help students, including those doing the project outside a formal class, to check their progress while working through the questions using the Excel or R walk-throughs. There are also brief notes for the more interpretive questions. Students taking courses using Doing Economics should follow the guidance of their instructors.

Part 4.1 GDP and its components as a measure of material wellbeing

Country Number of years of GDP data
Afghanistan 47
Albania 47
Algeria 47
Andorra 47
Angola 47
Anguilla 47
Antigua and Barbuda 47
Argentina 47
Armenia 27
Aruba 47
Vanuatu 47
Venezuela (Bolivarian Republic of) 47
Vietnam 47
Yemen 28
Yemen Arab Republic (Former) 21
Yemen Democratic (Former) 21
Yugoslavia (Former) 21
Zambia 47
Zanzibar 27
Zimbabwe 47

Number of years of GDP data available for each country.

Solution figure 4.1 Number of years of GDP data available for each country.

  1. The solution depends on your software and is not shown.
  1. This example uses China and the US.

US’s GDP components (expenditure approach).

Solution figure 4.2 US’s GDP components (expenditure approach).

China’s GDP components (expenditure approach).

Solution figure 4.3 China’s GDP components (expenditure approach).

China’s GDP components (expenditure approach), with annotations.

Solution figure 4.4 China’s GDP components (expenditure approach), with annotations.

  1. China and the US are used as examples.

Share of components of GDP in China.

Solution figure 4.5 Share of components of GDP in China.

Share of components of GDP in US.

Solution figure 4.6 Share of components of GDP in US.

  1. The following countries are used as examples:

    • developing economies: Brazil, China, India
    • economies in transition: Albania, Russian Federation, Ukraine
    • developed countries: Germany, Japan, United States.
Country Indicator name Proportion of GDP
Brazil Household consumption expenditure 0.64
Brazil General government final consumption expenditure 0.19
Brazil Gross capital formation 0.17
Brazil Net exports 0.00
China Household consumption expenditure 0.37
China General government final consumption expenditure 0.13
China Gross capital formation 0.47
China Net exports 0.02
India Household consumption expenditure 0.55
India General government final consumption expenditure 0.10
India Gross capital formation 0.36
India Net exports −0.01
Albania Household consumption expenditure 0.78
Albania General government final consumption expenditure 0.11
Albania Gross capital formation 0.27
Albania Net exports −0.16
Russian Federation Household consumption expenditure 0.52
Russian Federation General government final consumption expenditure 0.17
Russian Federation Gross capital formation 0.20
Russian Federation Net exports 0.11
Ukraine Household consumption expenditure 0.69
Ukraine General government final consumption expenditure 0.22
Ukraine Gross capital formation 0.16
Ukraine Net exports −0.07
Germany Household consumption expenditure 0.55
Germany General government final consumption expenditure 0.19
Germany Gross capital formation 0.19
Germany Net exports 0.07
Japan Household consumption expenditure 0.57
Japan General government final consumption expenditure 0.20
Japan Gross capital formation 0.24
Japan Net exports 0.00
United States Household consumption expenditure 0.62
United States General government final consumption expenditure 0.13
United States Gross capital formation 0.19
United States Net exports 0.07

Share of each component of GDP for a selection of countries in 2015.

Solution figure 4.7 Share of each component of GDP for a selection of countries in 2015.

Composition of GDP in 2015.

Solution figure 4.8 Composition of GDP in 2015.

Part 4.2 The HDI as a measure of wellbeing

  1. There are many valid points that can be made about the suitability of these measures, for example:

    The Gross National Income of a country consists of its GDP, plus income earned by residents living in foreign countries, minus income earned domestically by non-residents. GNI per capita, despite having many limitations, is the best widely available measure of living standards we have.

    The expected years of schooling and mean years of schooling are not good measures of knowledge. Most importantly, the quality of education varies across countries.

    Life expectancy, especially in developing countries, can be driven by rapid changes in infant and child mortality, and therefore may fail to reflect longevity. A longer life does not necessarily mean a healthy life.

    These indicators all have limitations as measures of the relevant dimensions.

  1. There are many possible answers, for example:

    These values are completely reasonable. Starvation, diseases, land erosion, and the lack of incentives are day-to-day realities for the people of the poorest countries in the world. Due to low income, poor countries cannot afford healthcare and education. Poor healthcare and education, many economists argue, may be the cause of low income in the first place.

  1. (a)(c) The solutions depend on your software and are not shown. For (b), if education is missing for one of the education variables, take the value of the available index as the education index.
  1. The solution depends on your software and is not shown.
  1. For the indicators in this example, child malnutrition and mortality rate (male and female) are used for health. Adult literacy rate, tertiary enrolment, and primary school teachers trained to teach are used for education.
Indicator Minimum Maximum
Child malnutrition (% under age 5) 1.30 57.50
Female mortality rate (per 1,000 people) 32.24 612.37
Male mortality rate (per 1,000 people) 63.70 580.50
Adult literacy rate (% ages 15 and older) 19.13 99.89
Tertiary Enrolment (% of tertiary school-age population) 0.80 110.16
Primary school teachers trained to teach (% of primary school teachers) 5.86 100.00

Minimum and maximum values of the chosen indicators.

Solution figure 4.9 Minimum and maximum values of the chosen indicators.

Note that the tertiary enrolment can be greater than 100% due to students in tertiary education who are younger or older than the usual age at which people receive tertiary education (18–23 years old).

Country Alternative Health index Alternative Education index Alternative Income index Alternative HDI excluding countries with missing data Alternative HDI rank HDI rank
Brunei Darussalam 0.866 0.702 0.996 0.846 3 1
Saudi Arabia 0.905 0.828 0.943 0.891 1 2
Kuwait 0.936 0.658 1.002 0.851 2 3
Belarus 0.820 0.932 0.763 0.836 4 4
Kazakhstan 0.724 0.804 0.815 0.780 9 5
Malaysia 0.812 0.728 0.832 0.789 8 6
Panama 0.809 0.728 0.796 0.777 14 7
Costa Rica 0.926 0.795 0.747 0.819 6 8
Serbia 0.888 0.677 0.726 0.758 19 9
Cuba 0.914 0.788 0.651 0.777 13 10
Iran (Islamic Republic of) 0.922 0.811 0.770 0.832 5 11
Georgia 0.853 0.763 0.677 0.761 17 12
Sri Lanka 0.807 0.627 0.707 0.710 29 13
Lebanon 0.895 0.759 0.739 0.795 7 14
Mexico 0.848 0.717 0.770 0.776 15 15
Azerbaijan 0.796 0.732 0.770 0.766 16 16
Algeria 0.863 0.669 0.741 0.754 22 17
Armenia 0.794 0.718 0.665 0.724 26 18
Ukraine 0.793 0.914 0.649 0.778 12 19
Thailand 0.777 0.810 0.752 0.779 11 20
Ecuador 0.762 0.700 0.704 0.721 27 21
Mongolia 0.734 0.853 0.702 0.761 18 22
Jamaica 0.869 0.687 0.668 0.736 24 23
Colombia 0.816 0.792 0.732 0.780 10 24
Tunisia 0.884 0.695 0.699 0.754 21 25
Dominican Republic 0.823 0.722 0.732 0.758 20 26
Belize 0.732 0.528 0.650 0.631 40 27
Uzbekistan 0.721 0.690 0.612 0.673 34 28
Moldova (Republic of) 0.814 0.765 0.592 0.717 28 29
Botswana 0.508 0.696 0.753 0.643 37 30
Paraguay 0.823 0.725 0.665 0.735 25 31
Egypt 0.748 0.562 0.697 0.664 35 32
Palestine, State of 0.875 0.785 0.598 0.743 23 33
Viet Nam 0.794 0.734 0.601 0.705 30 34
Philippines 0.629 0.758 0.669 0.683 33 35
El Salvador 0.753 0.689 0.657 0.698 32 36
Kyrgyzstan 0.766 0.703 0.519 0.653 36 37
Morocco 0.861 0.625 0.646 0.703 31 38
Guyana 0.736 0.547 0.639 0.636 39 39
Tajikistan 0.707 0.744 0.492 0.637 38 40
Bhutan 0.608 0.523 0.644 0.589 44 41
Congo 0.615 0.539 0.605 0.585 45 42
Lao People's Democratic Republic 0.566 0.628 0.592 0.595 43 43
Bangladesh 0.694 0.397 0.530 0.527 52 44
Ghana 0.649 0.455 0.551 0.546 49 45
Sao Tome and Principe 0.729 0.369 0.517 0.518 53 46
Cambodia 0.656 0.619 0.518 0.595 42 47
Nepal 0.652 0.547 0.476 0.554 46 48
Myanmar 0.612 0.675 0.589 0.624 41 49
Pakistan 0.603 0.469 0.592 0.551 47 50
Swaziland 0.193 0.555 0.653 0.412 70 51
Angola 0.472 0.390 0.626 0.486 58 52
Tanzania (United Republic of) 0.540 0.591 0.484 0.537 50 53
Cameroon 0.442 0.522 0.508 0.490 57 54
Zimbabwe 0.418 0.576 0.418 0.465 63 55
Mauritania 0.685 0.453 0.538 0.551 48 56
Madagascar 0.501 0.236 0.390 0.359 77 57
Rwanda 0.549 0.549 0.420 0.502 55 58
Comoros 0.596 0.511 0.391 0.492 56 59
Lesotho 0.152 0.523 0.529 0.348 78 60
Senegal 0.714 0.398 0.470 0.511 54 61
Uganda 0.479 0.552 0.425 0.482 59 62
Sudan 0.563 0.474 0.551 0.528 51 63
Togo 0.571 0.472 0.383 0.469 62 64
Benin 0.563 0.343 0.451 0.443 65 65
Malawi 0.485 0.493 0.359 0.441 66 66
Côte d'Ivoire 0.396 0.403 0.522 0.436 67 67
Gambia 0.598 0.434 0.413 0.475 60 68
Ethiopia 0.546 0.462 0.411 0.470 61 69
Mali 0.521 0.264 0.468 0.401 71 70
Congo (Democratic Republic of the) 0.489 0.572 0.289 0.433 69 71
Liberia 0.571 0.329 0.290 0.379 75 72
Eritrea 0.448 0.493 0.408 0.448 64 73
Mozambique 0.318 0.477 0.362 0.380 74 74
Guinea 0.548 0.322 0.356 0.398 72 75
Burundi 0.362 0.591 0.292 0.397 73 76
Burkina Faso 0.549 0.364 0.413 0.435 68 77
Chad 0.382 0.304 0.452 0.374 76 78
Niger 0.542 0.159 0.330 0.305 79 79
Central African Republic 0.334 0.263 0.267 0.286 80 80

Comparing alternative HDI rank and HDI rank.

Solution figure 4.10 Comparing alternative HDI rank and HDI rank.

  1. The same countries used in Question 5 are used as examples.

Scatterplot of GDP per capita rank and HDI rank.

Solution figure 4.11 Scatterplot of GDP per capita rank and HDI rank.

HDI
Low High
GDP per capita Low Afghanistan
Zimbabwe
Yemen
Georgia
Sri Lanka
Albania
High Botswana
Iraq
South Africa
Norway
Switzerland
United States

Comparison of countries according to GDP per capita and HDI.

Solution figure 4.12 Comparison of countries according to GDP per capita and HDI.